Speaking about the next steps on bank capital, the Federal Reserve's vice chair for supervision Michael Barr said the new Basel draft would revise all major areas of original proposals - credit risk, operational risk, and market risk - following industry criticism (the draft Basel rule was first unveiled in July 2023).
According to Barr, the Fed will propose updating the capital surcharge for global systemically important banks (G-SIB) to account for effects from inflation and economic growth under the new proposal.
The official also revealed that changes would exempt banks with assets between $100 and $250 billion from most new requirements except for recognizing unrealized gains and losses of securities in regulatory capital.
In addition, Barr said that the new plan would raise aggregate common equity tier 1 capital requirements for the G-SIBs, which are the largest and most complex banks, by 9% (compared to 19% in the initial draft), whereas for other large banks that are not G-SIBs, the impact is estimated to be equivalent to a 3-4% increase in capital requirements over the long run.